The fuel gauge indicator sits on the dashboard of a vehicle. (Photographer: Chris Ratcliffe/Bloomberg)

BQEdge | Why Maruti Suzuki’s Stock May Be Running Out Of Fuel

BQEdge is specially curated for BQBlue subscribers. Every day this note will offer special equity market and stock-specific insights and flag select emerging trends in the tricky-to-trade derivatives market.

On Today’s Edition:

  • Why shares of Maruti Suzuki—India’s largest carmker—will have a tough time shifting to top gear
  • Why this Vedanta group-owned telecom products maker is making the right calls.

Watch | Maruti Stock Fails To Gather Momentum

Sterlite Technologies Is Making The Right Calls

Sterlite Technologies Ltd. may be poised for a valuation upgrade. The telecom products maker is expected to announce its third-quarter earnings later in the day, and if its comments at an investor meet are to be believed, it may pleasantly surprise the street.

Sterlite Tech said it does not expect any adverse impact from the cuts in optic fibre prices and higher expenses. It also reiterated its target to achieve $100 million net profit by the fiscal year 2020 in an investor meet organised by Emkay Shares and Stock Brokers, allaying street concerns.

Sterlite Tech’s stock has corrected over 25 percent from its November highs amid fears of possible earnings misses and valuations.

The stock has been consolidating at valuations of approximately 20-21 times its FY19E earnings per share, lower than the one-year average of 25 and the five-year average of 22-23. If it meets its guidance, it will lead to an approximate 39 percent EPS CAGR for FY18-FY20E providing earnings visibility, and therefore at 21 times FY19E EPS and 16 times FY20E EPS, there is valuation comfort compared to historical averages.

BQEdge | Why Maruti Suzuki’s Stock May Be Running Out Of Fuel

With the end product prices stable, and the asking rate for each of the next two quarters being moderate, the possibilities of the company disappointing on the results is low. If Sterlite Tech delivers revenues of over Rs 1,100 crores (in line with Bloomberg estimates), it would be the highest revenue performance in any quarter.